Natural Gas Market Indicators – June 30, 2023
- Dangerously high heat is predicted to hit the Southern U.S., particularly Texas over the holiday weekend, which the Electric Reliability Council of Texas (ERCOT) expects might result in record-setting electric demand of more than 84,000 MW for the region
- Venture Global LNG entered into a major deal with the German government that will make Venture Global LNG Germany’s largest LNG supplier.
- The rate of injections into storage is eight percent higher than the five-year average, despite working gas in underground storage being 26 percent higher year-over-year.
A heat dome has developed over the state of Texas and is expected to expand to neighboring states over the holiday weekend. On June 27 the National Weather Service stated that the heat dome “is going to expand…north to Kansas City and the entire state of Oklahoma, into the Mississippi Valley…to the far western Florida Panhandle and parts of western Alabama.” According to the Department of Climatology out of Texas State University, the Texas heat dome is the result of the combination of a high-pressure system containing warm air that has merged with the warmer than normal air in the Gulf of Mexico in addition to the heat from the sun being nearly directly overhead. The Electric Reliability Council of Texas (ERCOT) issued a voluntary conservation notice on June 23 anticipating record demand on the grid. The week ending June 24, the U.S. was 20 percent cooler than 2022, and 14.3 percent cooler than normal.NOAA’s 16-day forecast anticipates mild temperatures on the East Coast, cooler temperatures in the Rocky Mountain region, and considerably hotter than normal temperatures on parts of the West Coast and in the South as we head into the weekend. NOAA’s latest key message forecasts that given the record or near-record high nighttime lows and elevated heat index readings it may prove to be more dangerous than typical Texas heat events as the hot high pressure over the southern U.S. will result in high temperatures of 90°F to 110°F. In addition to Arlene earlier this month, tropical storms Bret and Cindy mark the first time on record that two storms have formed east of the Lesser Antilles in June in the same year. The Weather Channel attributes this to” record warm ocean water for so early in hurricane season;” both storms quickly dissipated and were not particularly impactful in the end.
The EIA’s Natural Gas Weekly Update reported a 1.1 Bcf per day increase from 67.1 to 68.2 Bcf per day in consumption of natural gas in the U.S. for the week ending June 21. The rise in total demand was primarily driven by an increase in demand for power generation of 1.8 Bcf per day, from 35.9 to 37.7 Bcf per day, which more than offset a decrease in demand from the residential/commercial and the industrial sectors which saw a 0.2 Bcf per day decrease in demand, dropping from 21.4 to 21.2 Bcf per day and 21.4 to 21.2 Bcf per day respectively. ERCOT forecasts that power demand will increase to 84,664 MWh with the impending heat wave, well above the historical record peak of 80,148 MW hit on July 20, 2022, aa surpassing the roughly 76,000 MWh hit during Winter Storm Uri. Although the grid is anticipated to see record-breaking demand, ERCOT reiterated “there is currently enough capacity to meet forecasted demand.”
The EIA’s Natural Gas Weekly Update reported a 0.9 Bcf per day decrease in dry gas production week-over-week from 100.6 to 99.7 Bcf per day for the week ending June 21. Although the previous Drilling Productivity Report anticipated an increase in natural gas production out of several regions, the EIA’s reported amount of dry gas production is the lowest weekly average volume since February of 2023.
Pipeline Imports and Exports
According to the EIA, imports from Canada continued an upward trend for the week ending June 21 with a marginal increase of 0.1 Bcf per day to a total of 5.1 Bcf per day. Exports to Mexico increased 0.2 Bcf per day to a total of 6.6 Bcf per day.
Average natural gas deliveries to U.S. LNG export terminals decreased by 0.4 Bcf per day week over week to an average of 10.9 Bcf per day for the week ending June 21. Reuters reported on June 22 that Venture Global LNG confirmed a 20-year deal to provide a German government-owned integrated energy company, Securing Energy for Europe GmbH (SEFE,) with 2.25 million tons per annum (MTPA) of LNG. Venture Global LNG noted that the deal would make them Germany’s largest LNG supplier, with a combined 4.25 MTPA of LNG. The supplies will be delivered from Venture Global’s LNG Calcasieu Pass 2 (CP2) project in Cameron Parish, Louisiana and construction is projected to begin later this year.
Working Gas in Underground Storage
The EIA’s Natural Gas Storage Dashboard reported that working natural gas in underground storage totaled 2,729 Bcf for the week ending June 16, a 95 Bcf increase from the week prior. Net injections put natural gas storage 15 percent above the 5-year average and 26 percent higher year-over-year, while the average rate of injections is 8 percent higher than the 5-year average.
Baker Hughes reports that the U.S. rig count decreased by a net total of five to a total of 682 rigs for the week ending June 23. All five decommissioned rigs were oil-directed.
According to the EIA’s Natural Gas Storage Dashboard the twelve-month strip for natural gas prompt-month futures continues to remain below $4.00 per MMBtu. The EIA reports that international futures prices out of the TTF in the Netherlands and JKM in Asia increased week-over-week. Prompt-month futures increased $1.77 to a weekly average of $12.17 per MMBtu at the TTF, while futures increased $2.21 to a weekly average of $11.50 per MMBtu at JKM for the week ending June 21. As of June 30, prices out of Henry Hub were trading below $2.80 per MMBtu.
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